'Feeding frenzy' as big funds buy retail

Published on Saturday 21 November 2009 14:16

THERE has been a complete turnaround at the top end of Scotland's retail market with a "feeding frenzy" among cash-rich institutional investors, say commercial property experts.

The latest research from consultants Colliers CRE reveals that investors, such as big pension funds, are scrambling to snap up retail property as they come under pressure to spend.

Dermit Smith, director of investment at Colliers, said weak rental growth prospects were not deterring purchasers who are getting a much better return initially than they would by putting their money on deposit. He added that the rise in the stock market has also encouraged investment in property as funds look to balance their assets.

Scotland has also performed better than some parts of the UK for rental return. John Duffy, director of in-town retail at Colliers, said: "Although average prime rental in Scotland has seen a greater decline than the UK average, it has not suffered the dramatic falls of 30 per cent and above experienced in some regions."

However, there is a mixed picture emerging with Glasgow tending to fare better than Edinburgh.

Duffy said that the ongoing disruption caused by the tramline works has made the capital a less attractive place to shop. But the completion of the tram system in 2011-12 and the redevelopment of St James' Centre by Henderson Investors will provide a boost and encourage rental growth.

Even within Edinburgh there are marked differences between locations.

Smith said: "George Street continues to be of extreme interest to investors. But Princes Street is not high on the shopping list largely because of the tram works."

In Glasgow, he said Buchanan Street is top for retail investors. In Aberdeen, the 700,000sqft Union Square centre has also opened with a "healthy" 80 per cent occupation rate.